The Role of Ethics and Social Responsibility in Strategy - Essay Example

By defining strategic ethics, we can link and compare it with the concept of social responsibility. In this way, we can examine applications in the business context, thus concluding their roles in strategy.

Strategic ethics "comprises principles and standards that guide behaviour in the world of business" Ferrell and Fraedrich (2000:6). Social responsibility on the other hand is the obligation a business assumes toward society. Jennings (2003:6) defines these responsibilities as being economic, legal, ethical, and philanthropic. A business' economic responsibilities are to produce goods and services that society needs and wants at a price that can perpetrate the business and satisfy its obligation to investors. The legal responsibilities are the laws that they must obey. Ethical responsibilities are defined as behaviors or activities that are expected of business by society but are not codified in law. Philanthropic responsibilities are those behaviors and activities that society desires and business values dictate.

Social responsibility then can be viewed as a contract with society, whereas business ethics involves carefully thought-out rules of business organizational conduct that guide decision-making. Business ethics relates to rules and principles that guide individual and work group decisions, whereas social responsibility concerns the effect of organizational decisions on society.

The Role of Ethics and social responsibility in Strategy
When a corporation's values and ethics support its strategy, the company's stability and success are enhanced. Ethics and social responsibility are components of strategy because every business secures its future by contributing. Identifying that contribution and maximizing its value is a strategic initiative. Profit is the value the market attaches to an organization's contribution and the efficiency with which it makes that contribution. Swanson (1999:43) states that "employees who see their company making a valued contribution (with profits as outcome) rather than merely generating shareholder wealth, commit to their work with greater passion. This leads to a partnership between employees and corporate leadership that boosts innovation and uplifts performance". Ethics and social responsibility play vital roles in the preservation of this priceless partnership, which can thrive only in an atmosphere of trust and integrity. Trust and integrity result from integrating an organization's disparate strategic objectives.

Integrating disparate corporate values
According to Meznar et al (1997:47-49), many companies operate with at least three separate and usually non-aligned value systems. Measuring the degree of alignment between these value systems, and determining what drives each of them, highlights opportunities for change. The three value systems are The Espoused Value System (the values that management communicates both orally and in writing); The Perceived Value System (the values that employees believe drive management's conduct); The Actual Value System (the values that underpin the interpersonal dynamics of the organization). "To gain strategic advantage, these three systems must be integrated into one system of values. Furthermore, for these values to impact financial performance, senior management must translate them into an ethic that supports the organization's objectives, that is aligned with its strategy, and is understood by all levels of the organization".

An integrated value system takes into account the strategic objectives of the organization, the personal values of leadership, and the diversity of its employees. It aligns employee perceptions with management's espoused values. A system such as this can translate into the actual ethics and social responsibilities that drive management decisions and conduct Arrow (2001:305). Leaders often rethink their organization's values when they confront the behavioral and organizational changes that those values would compel when translated into a living ethic. They need to examine how congruent the chosen values are and how they promote or undermine the corporate intent and strategic objectives. Only then can leadership commit to a new system with all of its defined implications. Read More